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Data: FactSet; Chart: Axios Visuals

Following the fastest 10% correction in the history of the Nasdaq last week — taking just three sessions, surpassing even March's blisteringly fast slide — investors are split on whether it's a buying opportunity or the start of a new bear market.

On one side: Many hedge funds are buying, with fund managers that make both bullish and bearish stock bets buying internet and software companies at the fastest rate in five months last week, according to data compiled by Goldman Sachs.

  • Morgan Stanley data showed its hedge-fund clients also increased their exposure to growth and momentum stocks, which are largely Big Tech companies.

On the other side: Reuters' April Joyner reported Thursday that an "unidentified investor took off around $718 million of notional value in bullish options spreads" in Facebook, Netflix and Adobe stock, and partially closed a similar position in Saleforce previously.

What's happening: It's no longer just speculators, day traders and Robinhooders making moves — traditional buy-and-hold investors will be forced into action by the market's volatility, Jim Bianco, president of Bianco Research, told me on the latest episode of the "Market Banter" podcast.

  • "The market makes long-term moves three times a year now — down 34% in February–March, up 50% from March til September and then the fastest 10% correction in history in the Nasdaq."
  • "We've had two long-term investor moves in this market in the last eight months, maybe we're underway with a third one."

The big picture: The Nasdaq is near valuations last seen during the dot-com bubble and the index is up 58% since its March 23 low, having risen by 76% at its Sept. 2 peak. But many expect the Fed and the government to bail investors out should stocks fall far enough.

  • "There's a new dynamic in the market and that dynamic is the perception that the central bank has your back, the government has your back and they won't allow anything bad to happen," Bianco said.
  • "The decline that we've had to date isn't enough, but if it gets any hairier we expect them to come back in with more kitchen sinks to throw at this market."

The bottom line: "That's why you get this frenzied activity in things like the options market. ... It needs to be factored in to a lot of people's thinking but a lot of people aren't ready to do that."

Go deeper

Felix Salmon, author of Capital
Dec 17, 2020 - Economy & Business

The fever will break

Illustration: Aïda Amer/Axios

If I only had one word to describe 2020, I would pick "feverish."

Why it matters: The fever still rages — but never has it been more certain that by this time next year, and probably much earlier, the delirium will have broken. If 2021 is the year of reversion to normal — a year of slow but certain recovery from the ravages of 2020 — then by definition a lot of the weird excesses are sure to disappear.

Dion Rabouin, author of Markets
Dec 18, 2020 - Economy & Business

Bank of Japan to assess current programs as core inflation hits 10-year low

Data: Investing.com; Chart: Axios Visuals

The Bank of Japan extended its special support programs for businesses by six months and said it would “conduct an assessment for further effective and sustainable monetary easing” after Japan’s core consumer prices fell at the fastest pace in 10 years in November.

Driving the news: November's core consumer price index decline beat out October's historic decline when consumer prices fell by what was then the fastest pace in 10 years.

Updated 20 mins ago - Politics & Policy

Facebook paying up to $14M to settle employment discrimination claims

Photo: T.J. Kirkpatrick/Bloomberg via Getty Images

Facebook has agreed to pay up to $14.25 million to settle allegations that it discriminated against American workers by reserving positions for temporary visa holders, the Justice Department announced on Tuesday.

Why it matters: The settlement represents the largest civil penalty and monetary award that the Civil Rights Division has recovered in the 35-year history of the Immigration and Nationality Act's anti-discrimination provision.